Agarwal Technologies Was Founded 10 Years Ago

question 62

Multiple Choice

Agarwal Technologies was founded 10 years ago.It has been profitable for the last 5 years,but it has needed all of its earnings to support growth and thus has never paid a dividend.Management has indicated that it plans to pay a $0.25 dividend 3 years from today,then to increase it at a relatively rapid rate for 2 years,and then to increase it at a constant rate of 8.00% thereafter.Management's forecast of the future dividend stream,along with the forecasted growth rates,is shown below.Assuming a required return of 11.00%,what is your estimate of the stock's current value? Use the dividend values provided in the table below for your calculations.Do not round your intermediate calculations. ​

• A) $11.87
• B) $11.28
• C) $13.65
• D) $13.30
• E) $12.23

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Definitions:

Sandstone

A sedimentary rock composed mainly of sand-sized mineral particles or rock fragments.

Avalanche

A rapid flow of snow, ice, and possibly debris down a mountain slope, often triggered by factors like weather, temperature, and disturbances.

Imbricated Clasts

Rock fragments arranged in a way that they overlap each other like shingles on a roof, typical in sediment deposited by flowing water.

Earthquake

A sudden and violent shaking of the ground, often caused by movement within the Earth's crust or volcanic action.